Personal Loans for Freelancers

Who are Freelancers?

Freelancers are individuals who are not employed for a fixed employment contract but instead work on a per-project or per-task basis, often only for a short period. Those who prefer more independent employment without office politics and strict working times venture into freelancing.

In other words, they are self-employed individuals that provide services to various companies independently. They also specialize in certain fields, while others offer a broader range of services. However, the fact that freelancers did not take licensing examinations does not imply that they are not professionals.

Freelancers are categorized as a single or sole proprietorship in addition to being professionals. However, unlike business owners, freelancers are not required to get a business permit from various government agencies. The flexibility of the work‘s nature draws people to become freelancers, and they have the freedom to work at their convenience, provided that they meet their client’s requirements and the deadline.

Being a freelancer indeed comes with many advantages but can also present disadvantages, including getting personal loans.

Personal Loans for Freelancers

To be eligible for a personal loan, borrowers must show income proof. In the case of employed individuals, they can easily show payslips or a certificate of employment (COE). But in the case of freelancers categorized as ‘Self-Employed Individuals,’ the proof of income they can show is their business registration from the Department of Trade or Income Tax Return (ITR).

Several banks and other financial institutions offer personal loans for freelancers as long as the latter are eligible and submit complete documentation.

Where to Get Personal Loans for Freelancers?

Freelancers can submit their proof of income, such as ITR and audited financial statements, to these financial institutions to prove they can repay the loan with a reduced risk of default.

Banks

BPI

Freelancers, whether depositors or non-BPI depositors, can apply for a BPI personal loan online or through the branch nearest them and take advantage of the following loan features:

• Loan Amount: ₱20,000 up to ₱2 million
• Loan Term: 12 months to 36 months
• Repayment Methods: online or through ADA (Automatic Debit Arrangement)

CIMB Bank

CIMB Bank offers a personal loan to freelancers without the need for collateral or a guarantor. Aside from the seamless and all-digital loan application it provides, borrowers may also get to experience the following loan advantages:

• Loan Amount: ₱30,000 to ₱1 Million
• Loan Term: 12 to 60 months
• Minimum Income Required for Borrowers: ₱250,000 per annum
• Monthly Interest Rate: 1.12% to 1.95% (Corresponds to annual contractual rates of 24%, 30%, or 36%)
• Repayment Methods: online banking or over-the-counter

Citibank

Citibank offers one of the most competitive and convenient personal loan products in the market, allowing even freelancers to have access to a maximum loan amount to finance their needs. Their loan features include the following:

• Loan Amount: up to ₱2,000,000 without any collateral or guarantor
• Loan Term: up to 5 years
• Minimum Income Required for Borrowers: ₱250,000 per annum
• Age: 21 to 65 years old
• Minimum Income Required for Borrowers: ₱15,000 per month
• Monthly Interest Rate: 2.24% (based on Actual Contractual Rate)
• Repayment methods: post-dated checks (PDCs)

EastWest Bank

EastWest Bank is another option for freelancers looking for a non-collateralized personal loan with competitive interest rates. Simply fill out an online application form and prepare a scanned copy of the required documents to apply for EastWest personal loan.

• Loan Amount: ₱25,000 to ₱2 million
• Loan Term: 12 to 36 months
• Interest Rate: 1.49% to 1.89% per month
• Minimum Income Required for Borrowers: basic annual income must not be less than ₱180,000
• Repayment Methods: post-dated checks (PDCs)

Maybank

Maybank personal loan is an unsecured loan that allows freelancers to get up to ₱1 million at the lowest possible interest rate and without the need for collateral. Here are the other key features that make it worthwhile to consider:

•  Loan Amount: up to ₱1 million
• Loan Term: up to 36 months
• Monthly Interest Rate: 1.3%
• Eligibility: 21 to 65 years old and must have been in the same profession for at least 3 years
• Repayment Methods: online banking, e-wallet, over-the-counter via UCPB branches

RCBC Bank

RCBC Bank also accommodates freelancers’ financial needs through RCBC personal loan products. Here are the loan terms and tenure:

• Loan Amount: ₱50,000 to ₱1 million
• Loan Term: 6 months to 36 months
• Monthly Interest Rate: 1.3%

Tonik Bank

Tonik Bank is a digital bank that provides quick loans. The bank is not strict with the applicant’s credit history, and it includes a form that will assist the applicant in determining whether they are pre-qualified for a Tonik Loan.

Loan Amount: ₱5,000 to ₱50,000
Loan Term: 6 to 24 months
Interest Rate: A fixed monthly interest rate of 7% and 5.42% when you link your salary payroll ATM card

Online Lending Services

CashMart

CashMart is a reliable source of risk-free, transparent, and cost-effective loan solutions for freelancers. CashMart is an affordable online loan in the country with flexible repayment terms and relatively minimal requirements. Other loan features available to freelancers are as follows:

• Loanable Amount: ₱3,000 to ₱30,000
• Loan Term: Weekly (due date every 7 days), Bi-weekly (due date every 14 days), and Monthly (due date every 28 days)
• Interest Rate: 0.0571% per day (APR: 20.8415%)
• Age Limit: 21 to 50 years old

CashWagon

CashWagon provides quick lending services, allowing applicants to qualify for a loan within hours of registering and meeting the terms and conditions. What applicants may benefit from CashWagon is listed below:

• Loanable Amount: up to ₱20,000
• Payment Terms: up to 180 days
• Interest Rate: 0% interest for the first-time loan within 10 days

EasyRFC Multipurpose Loans

EasyRFC Multipurpose Loans offer extra cash that may be used in emergencies or simply cover any personal ventures. As RFC does not demand collateral or a guarantor, taking out a loan is simple and easy.

• Loanable Amount: up to ₱250,000
• Payment Terms: 3 to 12 months
• Qualification: Have been in the same profession or the same business for at least 3 years for professionals and self-employed individuals

SB Finance

SB Finance is ideal for freelancers looking for personal loans with no collateral or credit card required and a convenient application process. The offer is intended to assist individuals, particularly freelancers, in achieving personal goals and covering potential expenditures.

• Loanable Amount: ₱200,000 to ₱2 million
• Payment Terms: 12 to 36 months
• Monthly Add-On Rate: 1.89%
• Minimum Gross Monthly Income: ₱60,000

Tala Personal Loan

What distinguishes Tala from the competition is the freedom of borrowers to set their preferred due date, which enables them to gain control over their finances. Borrowers simply need to download the Tala App and fill out all of the required information to apply. Until then, here are some of the loan features to think about:

• Loanable Amount: up to ₱15,000
• Payment Terms: up to 61 days
• Monthly Interest Rate: 9.5%

How to Get a Personal Loan for Freelancers

Register Your Business 

The first step is to register the business as a self-employed professional since banks and other formal lending institutions have strict loan requirements.

Having their business registered with the Bureau of Internal Revenue (BIR) and being able to provide receipts with the freelancer’s name on them would give the lending institution assurance and confidence that the customer they are engaging with has a legitimate business and is fulfilling their BIR tax responsibilities.

It helps confirm the freelancer’s credibility, leading to better interest rates and a higher probability of loan acceptance.

File Your Taxes Regularly

On top of having a registered business, freelancers can only be eligible if they have proper documentation. Some financial institutions are stringent when it comes to personal loan requirements since most of them do not require collateral or a guarantor. Hence, an Income Tax Return (ITR) is required.

Paying the right amount of tax on time is important when applying for a personal loan as it will provide a verification of one’s strong sense of financial responsibility – a plus factor for lending institutions.

Secure All Your Business Documents

A registered business is accompanied by a number of documents confirming its operational legitimacy in the country – this includes business permits from various government agencies such as DTI Registration, Mayor’s Permit, and Barangay Clearance to name a few.

For self-employed professionals looking for personal loans, having personal copies of these documents can speed up the application process.

Maintain a Good Credit History

Credit history will be carefully reviewed when applying for a personal loan, especially if the preferred lender is a bank. So, always aim to have a good credit score by paying what is due in full and on time, especially on existing credit cards.

The credit score represents the borrower’s financial history and capacity to repay the loan, which is why it is important for the lender to always have this checked before making a lending decision.

Deposit Your Savings (Proof That You Are Earning and You Have Revolving Funds)

Even if freelancers have a good credit score, they must also meet the lender’s income requirements to be approved for a personal loan. Income is also an important factor for lenders since it helps them decide whether or not the applicant has the ability to repay the loan.

This can be done by submitting documents such as bank and income statements; however, for freelancers and self-employed individuals, tax returns or bank deposits are sufficient to prove that they are earning and have revolving funds. When a deposit is made towards the savings account, it also means that the borrower has excess funds left after paying for the essential expenses.

Apply for a Loan in a Bank Where You Have a Long-Term Account

Before searching for other banks and lenders who offer personal loans, freelancers should see whether the bank with which they have a long-term account offers the same product at a better rate. Because when it comes to these kinds of deals, most banks favor their existing customers.

For instance, some banks do not even look at how much money their customers have in their accounts as long as the accounts have been active for a long time. So, in order to boost their creditworthiness, strive to maintain a positive connection with their bank. Freelancers can do this by continuing to accept freelance contracts directly into their bank accounts and keeping a sizable deposit.

Important Documents for Freelancers to Apply for Personal Loans

Register Your Tax Identification Number 

Tax Identification Number (TIN) comprises a unique 9-digit plus three-digit code (branch code) purposely used for tracking taxpayers – an individual or a company. When filing your monthly return (for single proprietors, partnerships, companies, etc.) or Annual Income Tax return (Individual or companies), the TIN must be indicated on the Tax Return. This is an especially important document when applying for personal loans. 

Register and Acquire a Business Permit

This can be acquired at the municipality where your business or your home is located. It is one of the regulatory requirements to be an eligible self-employed or a business owner. 

Steps of obtaining one will include the following:

• Go to the Business Permit and Licensing Office (BPLO) in the city/municipality town hall where your business is located.
• Fill out the application form.
• Submit the application form and the initial requirements.
• An assessor will assess your application for tax and fees.
• Pay the necessary taxes and fees.
• Submit the remaining requirements (should there be any).
• Claim your business or mayor’s permit.

Register and Acquire DTI Permit

Same as with a business permit, this is a must-acquired permit to ensure the legality of the existence of your business. The DTI permit can be acquired by simply visiting the DTI website and registering the name of the business and the scope of the business. 

Other General Requirements 

• A certificate or proof of doing a business transaction with your clients
• Stable source of finances
• Good credit standing

Like any other employed individuals or sole proprietors, requirements for loan applications for freelancers are the following:

• Loan application form
• Valid government-issued ID
• Annual income tax return (BIR 1701)
• Bank statements
• DTI permit
• Business permit
• Audited financial statement (AFS)

Benefits of Personal Loans for Freelancers

When compared to other types of loans available in the country, personal loans have been shown to provide numerous benefits, particularly to freelancers or self-employed individuals. Among the advantages available to them are the following:

Collateral-free Loan

Most personal loan providers do not require collateral or a guarantor, which is highly advantageous to freelancers as they no longer have to put their assets at risk to assure the lender concerning the loan repayment. Although there will be consequences should they default on their loan, it will not be as serious as losing a property – which is the case with a secured personal loan.

High Borrowing Limits with Reasonable Interest Rates

Despite the risk lenders are taking due to the lack of collateral and a guarantor, freelancers could still expect a higher loanable amount at the lowest reasonable interest rate when applying for a personal loan, provided they have an excellent credit history and other proof of their credibility and creditworthiness.

Personal Loans are Multipurpose Loans

One of the benefits of a personal loan is that it may be used for almost any reason – from major purchases to debt consolidation. Personal loans are ideal for freelancers who feel the need for extra cash but are unsure or have various plans to spend the loan proceeds. In short, this loan has no specified purpose; they can spend it however they see fit.

Caution Before Deciding to Avail of Personal Loans

Freelancers, compared to permanently employed individuals, have varying levels of income. This also means that being self-employed, the income will not be consistent. With this in mind, freelancers must know that loan repayments are to be paid regularly, and on time, and will not depend on whether the borrower is profitable or not. 

Among other things that freelancers must be cautious about before taking a loan include the following:

No Intent to Religiously Pay the Loan Back

Commitment is an important element when taking a loan. When a person defaults on a loan, expensive late payment charges and penalty fees will be imposed upon the borrower which can make it more difficult to pay the loan back. This will also severely hurt the credit score of the borrower and will prevent him or her from taking a loan from other financial institutions. 

No Plans to Generate More Profits

The freelancer must ensure to work towards generating more income to cover the future payments of their personal loans. Although the income depends on the work a freelancer gets, it means that he or she must keep on working to ensure payments are met when due. 

Secured Personal Loans

Many financial institutions reject loan applications of freelancers without the documents they require to prove that they have a steady stream of income. The truth of the matter is that many freelancers cannot provide this. However, this does not mean that freelancers do not have any other options. They can still apply for a secured personal loan. 

A secured personal loan is a type of loan that is secured by collateral. The loan amount that can be borrowed will depend on the appraisal value of the asset pledged. If the freelancer defaults on the payment, the lender retains the right of taking the property as payment of the loan amount.   

Conclusion

There are many benefits of becoming a freelancer in terms of salary, working time, freedom, etc. and there are a few pitfalls as well. Applying for a personal loan is never easy when someone is a freelancer because lenders are not always sure whether or not the borrower will be able to fulfill their obligations. 

When freelancers are prepared for the requirements, including the proof of tax payments, there’s no need to worry about applying for personal loans. If the documents are complete, there’s a higher chance of getting approved.